Citing coastal environmental concerns, Delaware officials sought to stop the proposed Crown Landing terminal project by refusing to permit construction of a pier and tanker-loading area extending from the plant into the river.

Delaware's claim to the entire river dates from a 1682 land grant from the Duke of York to William Penn. In earlier versions of the same border dispute, the Supreme Court has upheld Delaware's control over the entire river. At issue in the most recent version of the dispute was whether Delaware had granted open-ended permission to New Jersey to pursue development projects extending into the river under a 1905 agreement between the two states.

In its ruling on Monday, the court found that Delaware's authority over the river remained undiminished despite the agreement known as the 1905 Compact.

The decision turns on the majority justices' interpretation of the compact, an agreement in which both states sought to settle the border dispute for all time.

The agreement says in part: "Each state may, on its own side of the river, continue to exercise riparian jurisdiction of every kind and nature…."

New Jersey read the agreement as authorization to proceed with its LNG plant. Delaware disagreed.

"We hold that Article VII of the 1905 Compact does not grant New Jersey exclusive jurisdiction over all riparian improvements," writes Justice Ruth Bader Ginsburg for the majority. "We resist reading the uncommon term 'riparian jurisdiction,' even when aggrandized by the phrase 'of every kind and nature,' as tantamount to an express cession by Delaware of its entire territorial jurisdiction ... over the Delaware River."

In his dissent, Scalia said the 1905 Compact should be read to permit New Jersey to move forward with its development project. "The whole purpose of the 1905 Compact was precisely to come to a compromise agreement on the exercise of the two states' sovereign powers," he writes. "Under the plain terms of the 1905 Compact, each state had 'jurisdiction' – the authority of a sovereign power to govern or legislate – over wharfing out on its own side of the river," he writes.

The decision will effectively block development of the LNG plant. State officials have said the plant would produce 1.2 billion cubic feet of natural gas per day – enough to supply every home in New Jersey, Delaware, and eastern Pennsylvania. The project had been expected to create more than $1 billion in new jobs and other economic benefits in the region, according to economists.

Monday's decision in New Jersey v. Delaware marks the third time in 130 years the Supreme Court has been asked to address the border dispute. In 1877, it was a disagreement over fishing rights. In 1934, it was joint claims to oyster beds.

At the heart of the most recent case was how much control Delaware could exert over development projects on New Jersey's side of the river. Normally, Delaware would have no power to veto projects under way in New Jersey. But the LNG plant required construction of a 2,000-foot pier and dredged area in the Delaware River, where up to three tankers per week would be off-loaded. If the entire river is sovereign Delaware territory, as the courts have ruled, New Jersey would need permission to build.

New Jersey countered that the 1905 agreement gave it the right to undertake development projects extending into its side of the river, even though Delaware retained control and ownership of the entire river.

A special master appointed by the Supreme Court to investigate the issue filed a report in April 2007 agreeing with Delaware's interpretation of the 1905 Compact. New Jersey appealed to the high court.

In siding with Delaware, Justice Ginsburg said New Jersey retained some riparian rights – just not exclusive rights to undertake unusual or extraordinary projects. "Delaware may not impede ordinary and usual exercises of the right of riparian owners to wharf out from New Jersey's shore," she writes. "The Crown Landing project, however, goes well beyond the ordinary or usual."

The assertion provoked a barbed response from Scalia, questioning how the court would define a wharf of "extraordinary character."

"What in the world does it mean? Would a pink wharf, or a zig-zagged wharf qualify?" he asks in his dissent.

Scalia suggested that environmental concerns of some justices about the LNG project may have influenced the outcome. "Our environmentally sensitive court concedes that if New Jersey had approved a wharf of equivalent dimensions, to accommodate tankers of equivalent size, carrying tofu and bean sprouts, Delaware could not have interfered," Scalia writes.